Friday, August 13, 2010

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Introduction: What Is a Mafia Offer?

A Mafia Offer sounds like something out of a movie, not something that could seriously help you make more money in your business by increasing and controlling your sales.

Dr. Goldratt first introduced the concept of a Mafia Offer in his book It’s Not Luck (Goldratt, 1994, 133). Later, he defined a Mafia Offer as “an offer they can’t refuse” (Goldratt, 2008, 67). But in writing, he more frequently refers to it as an unrefusable offer (URO; Goldratt, 1999, 120) and more recently he (and Goldratt Consulting) emphasizes the need to establish, capitalize, and sustain a decisive competitive edge (Herman and Goldratt, 2008).

For this chapter, I will use the term Mafia Offer and have defined it as follows: An offer so good that your customers can’t refuse it and your competition can’t or won’t offer the same. In addition, I will refer to the operational improvements required for a Mafia Offer as the decisive competitive edge, operational advantage, or competitive advantage.

A Mafia Offer is simply the offer you make to your market—your prospects and customers—to make them desire your products or services and something that your competition cannot quickly match. And, of course, the offer you make is a combination of your products, services, and how you deliver them. Moreover, for your offer—the solution you’re selling—to be unrefusable, you are most likely offering something of equal or greater value than the price you are charging.

Many people confuse a Mafia Offer with a unique selling proposition (USP), customer value proposition (CVP), or a sustainable competitive advantage (SCA).

At first blush, it would seem that a Mafia Offer is similar to these other terms; however, when most people are talking about these alternatives they are actually quite different from what TOC experts mean by a Mafia Offer.

USPs, CVPs, and SCAs take what you already do and state it succinctly and with more specificity aimed at one or a few of their customers’ problems or gaps in current market offerings. These alternatives can be Mafia Offers, but most of the time they are not. Furthermore, an SCA is, in my view, an operational or technological (although these are not typically sustainable) advantage and not an offer per se.

Most companies offer solutions that solve their customers’ various problems or symptoms. With a Mafia Offer, we are addressing our customers’ core problem as it relates to doing business with our industry.

A Mafia Offer typically requires that you do something different (make operational improvements to establish a decisive competitive edge) to address your prospect’s core problem. These operational improvements allow you to actually deliver something unrefusable to your customers and something that your competition can’t or won’t do because they are not willing to or don’t know how to make the same improvements. In other words, you have to establish an operational advantage.

In this way, a Mafia Offer is a sustainable market offer built on this advantage. Mafia Offers are not a positioning or a tag line and “can only be created by satisfying a significant need of the market to the extent that no other significant competitor can” (Herman and Goldratt, 2008). A Mafia Offer is where we start if you have a market constraint.
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Spend just two hours reading this chapter and if you don’t get at least one good idea for your business, contact me and I will give you a refund!

—Dr. Lisa

That’s a Mafia Offer and it’s real. The purpose of this chapter is to introduce you to the Mafia Offer—the Theory of Constraints (TOC) marketing solution. The chapter progresses from the discovery of what a Mafia Offer is, to the guidelines for creating an offer, to how to present an offer, and ends with how the reader can create their own Mafia Offer.

The best way to read this chapter is in order. Each section builds on the subsequent sections, so that when you reach the summary you will have a very good understanding of what we in TOC call the “Mafia Offer.”

Click here to get the BEST price for Chapter 22 on Mafia Offers! (this is for the DIGITAL version of Chapter 22, there is not a printed version of just Chapter 22). Amazon offers this as a Kindle version but you DON'T need a Kindle to purchase and read it. They offer Kindle readers for the PC, Mac, Iphone, Ipad, Blackberry and Android.

Thursday, August 5, 2010

I just completed my first Stompernet faculty office hour where I covered the Theory of Constraints Thinking Process tool called the Cloud or the Evaporating Cloud. The cloud is used to understand the root cause of undesirable effects and/or conflicts.

While the cloud is part of the complete Theory of Constraints Thinking Processes, it is also a very useful stand alone tool. You can use this quick reference guide to get you started.

Tuesday, August 3, 2010

I interviewd Pam Watson Korbel on the 7 Synergies for Business Success. We found a lot of similarities between what Pam does and recommends and what we at Science of Business do (Theory of Constraints) and recommend. Here is the video interview and below is Pam's article on the 7 Synergies. Please leave your comments to this video!

7 Synergies for Business Success

Who can deny that they want more money, less work, more fun.™ In fact, no one has ever told me that this SmartGrowth brand promise was senseless. More often, they want to know the formula to achieve this level of freedom. The seven synergies for business success will lead you to this fountain.

Many of you will work hard to set goals and devise business plans to achieve growth... in sales, in profits, in business valuations. At the same time you probably feel a little “befuddled” about what to expect given the current state of the economy and business environment.

The following list of “tried and true” business synergies come from over 20 years of experience working with hundreds of small and mid-sized companies throughout the United States. The principles work during an economic upturn or downturn. Whether it was the Mid-western recession of the mid-80’s, the early 90’s California recession, the late 90’s boom or today, time has proven these growth principles. Keep them in mind as you plan today and in the future. Each synergy includes a checklist of tangible actions you can take in your business to implement each principle.

1. Grow from the inside out.

To profitably grow your sales, build off the foundation already proven successful in your company. Focus on your customer base and your product and service portfolio. Prioritize opportunities according to this list:

• The easiest way to grow your sales and profit is to sell more of your existing product to your existing clients.

• The second easiest way is to sell new products to existing clients.

• The third priority should be to find new clients for your existing products.

• Do not create new products for customers you don’t have yet.

Another way of looking at this is that it is easier and less expensive to find new products for existing customers than it is to find new customers.
___ an ideal client profile exists

___ sales and marketing budget that targets existing and new customers

___ system for competitive research

___ defined process to generate leads

___ defined process to maintain client relationships

___ defined process to submit bids and write proposals

___ a process exists to identify opportunities for new products and services

___ existing customers are served first each day

2. Develop a “brand promise” and live it daily.

Once you have been in business for two or three years, your customer base is large enough that, through a focus group or interviews, you can uncover why customers “really” buy from you. That is brand promise. When you know and understand that promise, integrate it into every aspect of your business. Just think of McDonald’s brand promise to provide you with consistency. Do they live that promise daily? Would they be where they are today if they had not?

___ clients provide referrals

___ company maintains a client/prospect data base

___ system for regular customer feedback and research

___ system for gathering input about products and services

___ incentives provided for repeat business with company

___ the company has a written definition of quality

___ vendors must meet standards for quality

___ company defines a competitive market position that is unique

___ the company can measure “real” image and reputation

3. Put people first.

On one of my new motivational calendars this saying appears: “Keep your employees happy and they will keep your customers happy.” Another page says, “Companies don’t succeed, people do.” Whether times are good or not, the most successful companies have found that people are the critical difference to long-term success in a competitive environment.
___ employees are encouraged to cross boundaries

___ turnover is below the industry average

___ an employee appreciation plan is in place

___ an employee recognition system is in place

___ managers may deviate from defined policies to be flexible with employees when it does not hurt the business

___ employees receive on-the-job and/or classroom training every year

___ employees understand what decisions may be made without management approval

___ the company has an employee manual

___ every employee has a job description

4. Values validate valuation.

Having worked at Enron in its early days of the 80’s and now lived to see where it ended up, I have no better testimony as to the importance of defining company values and living them. In the end, they do validate your company’s valuation.
___ prospective employees are screened for their fit with company values

___ a written, company values statement is provided in the employee handbook and visibly posted throughout the company

___ the executives discuss the company’s values statement during employee orientation and at least twice a year at company meetings

5. Lead to create and maintain wealth.

Michael Gerber of the E-Myth has a great saying, “Owners need to work ON their business not IN it.” How much time do you spend every week working IN versus ON your business? Your job description and duties should be oriented so that the business operates without you. Those businesses have higher valuations.
___ an exit plan for the business exists

___ succession plans exist for each shareholder working in the business and every key manager and key employee

___ the valuation of the business is re-evaluated annually

___ the industry system for establishing business value is well understood (value drivers, methods of valuation commonly used, trends)

___ owners spend four or more weeks a year away from the business

___ strengths, weaknesses, opportunities and threats reviewed twice a year

6. Hire both leaders AND managers.

Leaders work on strategy, vision, mission, values and goals. They rely on managers to create systems, implement goals, and deliver the brand promise. Every business needs both leaders and managers. The person who can be both a leader and manager is truly gifted and rare.
___ regular meetings are held at the shareholder, executive and employee levels

___ the company has 5-year, 1-year, quarterly and monthly goals

___ the company posts its mission, vision, values and goals

___ the company has a business plan (sales forecast, expense budget, organizational chart and plan)

___ outside advisors meet regularly with the shareholders and management

___ employees document policies and procedures

7. Monitor, Monitor, Monitor…whatever you measure will improve.

I have never seen this fail. When clients are short on cash and they start measuring it, cash improves. When businesses do not have enough sales to cover overhead and they monitor sales daily, sales increase. When employees overspend and management starts monitoring, expenses decline.

___ each business function develops monthly and quarterly goals

___ each business function has one to four key numbers that it monitors via a written report

___ each employee understands his/her one key measurement

___ each employee has a performance contract or scorecard

___ each employee has a performance review twice a year

___ employee compensation is driven by performance and merit

___ company measures itself against a budget

___ company compares results to industry standards and sets goal to exceed the industry

___ financial statements are produced by the 10th of each month

___ monthly sales reports are prepared by the 5th of each month

___ sales are measured daily

The Intangible Synergy – The quality of the CEO is directly proportional to the quality of the company.

Great CEOs incorporate the skills of discipline in their personal lives and those skills carry over to company results.

___ Company executives, managers and employees follow a time management discipline.

___ The company follows a regular meeting schedule.

___ Wellness is promoted among all stakeholders.

___ Personal balance is encouraged among employees.

___ All stakeholders are satisfied with the communication practices.

___ Stakeholders share a positive affirmation that the company will succeed.

With these simple tenets, there is no reason for more money, less work and more fun™ to be a mystery. If you have not started setting goals and developing a plan for this year, start now. If you have, did you incorporate these guidelines?

The big payoff if you follow these guidelines is simple freedom to choose your activities. By growing successful businesses, women business leaders will achieve the freedom to spend more time on corporate boards, community service and public policy.

Thursday, July 29, 2010

Here's the Amazon description:
"Spend just two hours reading this chapter and if you don't get at least one good idea for your business, contact me and I will give you a refund!" Dr Lisa Lang That's a Mafia Offer and it's real. The purpose of this chapter is to introduce you to the Mafia Offer-the Theory of Constraints (TOC) marketing solution. The chapter progresses from the discovery of what a Mafia Offer is, to the guidelines for creating an offer, to how to present an offer, and ends with how the reader can create their own Mafia Offer. A Mafia Offer delivered correctly, can give you better control over your sales. What's better control? How about closing as much as 80 percent of your opportunities?

Because this chapter is on marketing, I thought that a good marketer should get their book to #1, otherwise you're not really practicing what you preach. So after a little marketing campaign, Chapter 22 is still number 1. During the campaign we reached #1 in two categories, but as of today July 29, 2010, here is the current ranking:

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Here are the 4 reviews for Chapter 22 that have been posted on Amazon so far:

5.0 out of 5 stars Business can now rise way above the Blah Blah Blah, July 17, 2010
By Casinero - See all my reviews
Amazon Verified Purchase(What's this?)

This review is from: Mafia Offers: Dealing with a Market Constraint (Chapter 22 of Theory of Constraints Handbook) (Kindle Edition)

At last! Someone has written a superbly useful methodology for anyone in any situation to rise above the crowd. A must read for anyone who wants to sell "ANYTHING" including themselves, and hey! who doesn't want to sell themselves.

This review is from: Mafia Offers: Dealing with a Market Constraint (Chapter 22 of Theory of Constraints Handbook) (Kindle Edition)

Dr Lisa once again brings real value to the market. There are about a thousand Constraints Management folks that know how the tools work at some level that brings value to their clients. Then, there are a small handful of true experts that have applied the tools so often as to become the de facto standard bearer. When it comes to unrefusable offers (UROs) also known as Mafia Offers, Dr Lisa is a group of one. Period. I am pleased to add this chapter to my iPod touch.

This review is from: Mafia Offers: Dealing with a Market Constraint (Chapter 22 of Theory of Constraints Handbook) (Kindle Edition)

This is a nice little read covering the essentials of what a mafia offer is, how it differs from other marketing approaches, and how to construct one.
Buy this chapter: it's a very small bet which could have a huge financial payoff for your business.

5.0 out of 5 Summary of Unrefusable Offers, July 16, 2010
By Lane Kagey - See all my reviews
Amazon Verified Purchase(What's this?)

This review is from: Mafia Offers: Dealing with a Market Constraint (Chapter 22 of Theory of Constraints Handbook) (Kindle Edition)

This is a good summary of unrefusable offers. It defines them and then gives some simple examples of what they look like and how to build them. It is a nice introduction to the topic.
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It stirred up a lot of response. My heart rate increased as the first responses starting showing up within 10 minutes! Here are just a few of the first responses I received:

“Liked this one a lot!”

“I really love this – I talk to “just do it” all the time in my work (it’s in a frame on my desk). Adding “don’t be a sissy” is fantastic.”

“Amen”

“Great mail Lisa!”

“Agreed and amen!!“

So it seems that I have your permission to be direct (except for the few people who unsubscribed). Now, I want to cover the second Theory of Constraints Law of Leadership – “Just do it!”

So now that you know how not to be a sissy and you’ve decided what you are going to go do. Just do it!

“Just do it” does NOT mean steam rolling your people (but at the same time don’t let THEM be sissies!), it means to focus and get it done NOW.

Use the Theory of Constraints buy-in and “yes, but …” processes to get agreement on what you want to do and why you want to do it. These processes also serve to clarify what exactly you’re going to go do and usually the solution improves in the process.

Then, if you have someone who just doesn’t want to do it -- do it anyway. Ask them if they are willing to try (really try) it. If so, then get on with it. If not, it maybe it’s time to replace that person with someone who is.

Don’t make excuses as to why you can’t start now. If there are other things going on, and those things are NOT your biggest most important project (yes singular) – stop doing them. You can start them again if they become your biggest priority.

There are really only 2 Theory of Constraints “Just Do It” measures:

1) Reliability – did you do what you said, when you said you’d do it. Whatever the something was you decided to do that we talked about in Part 1 – did you do it on-time? If you are unreliable you didn’t. If you are reliable you did it and finished when you said you would. Due date performance is a type of reliability measure.

2) Effectiveness – you didn’t waste time being distracted on other things and/or doing things you shouldn’t have been done. Ineffectiveness is the biggest cause of unreliability and “not doing”. If you’re doing things you shouldn’t, typically you are making it very difficult to be reliable and get done what you should. Inventory is a type of ineffectiveness measure – if you have produced something ahead of when it was needed in order to be efficient or to save money.

Being ineffective is really a focusing issue – both not working on the right things and working on too many things at one time.

So get really clear on what you’re going to do and what you’re NOT going to do and then get it done.

And to me, that takes care of leadership. There are only 2 things you need to do:

1) Don’t be a sissy!

2) Just do it!

One of the best leaders I’ve interacted with recently was one of my Velocity Scheduling System clients – Tanya DiSalvo, President, Criterion Tool. Her team was struggling with buying into VSS but she held firm (definitely not a sissy) and then focused on doing it. And doing it right, not some watered down version of what the group was first willing to do.

Here’s the payoff she and her team got:

And I received this email update from Tanya on June 6, 2010:

“Welp it’s Criterion’s one year anniversary with the VSB (Velocity Scheduling System) and WE STILL love it!

A few major projects went thru our building: new product launch in Oct- Dec, another new product launch currently under way, reduction of staff thru attrition and increase in work, and in most cases we came thru with flying colors.

Attached is our score card. :)”

Wishing you unsissified success,

Dr Lisa

P.S. Make sure that you click on the links above. They link to additional information and some really good stuff.

Saturday, July 3, 2010

July 4th makes me think of being patriotic and that makes me think of the military and the military makes me think of our great leaders. So I did a little internet surfing on leadership.

In a Google search there were 154,000,000 results for the word leadership. On the National Speakers Association's website there are 650 speakers who are experts on Leadership.

I don't know about you, but as an engineer and NOT a very touchy feely kind of person, I have trouble relating to all the discussion on leadership.

I don't have anything against leadership or the people who speak on it or write about it (there are tons of those people and some of them are my friends), I just don't see what the big deal is.

Theory of Constraints is about focus, so assuming you are focused. There are only 2 things - guiding principles if you will -- that a leader or manager needs to keep in mind. I call them the Theory of Constraints 2 Laws of Leadership:

1) Don't be a sissy!

2) Just do it!

Any leader, who is bold about what they want and goes after it without apology and with perseverance, has my attention. And if this direction is delivered in a respectful way, they have my respect. I will follow where they lead. (Am I alone here?)

Now that sounds easy, probably too easy. So let's apply it. Don't be a sissy means - don't let old patterns, past ways of doing things, and failures stop you from finally getting 99+% on time all the time, reducing lead-time, and from dramatically reducing chaos or whatever your goals are.

Pick a technique, a philosophy, or anything that you think might get you closer to your goals. And realize that if you want improvement, you have to DO SOMETHING different. It is also true that not all change is improvement, so select carefully, but DO make a selection.

I once told a client who wanted to do an incentive program (which generally I'm against) that I didn't care if they wanted to bring clowns in on Fridays - but to DO SOMETHING.

Now, I'm partial to my programs and Theory of Constraints for the "something to do" - but even if you don't go with the changes I recommend, you will get some improvement simply by doing something and sticking with it.

For example GE chose Six Sigma as the horse they would ride. I can tell you why that may not be the best overriding philosophy, and how they could get better results by using Theory of Constraints to direct their Six Sigma efforts (see 2 articles below), but the reality is that they did improve by making the selection and sticking to it.

Don't be a sissy also means don't make excuses and don't blame anyone but yourself for the results you get or don't get.

It is our job as managers to put systems and processes in place that get the results we want. Our systems and processes comprise the policies, procedures and measures that direct our peoples' actions. If you're not getting the results you want, just look in the mirror.

Don't listen to the voice in your head or to your employee's who say:

"that will never work"

"we already tried that, and it doesn't work here"

"you don't understand ..."

And one other thing that "don't be a sissy" means is that if you make a mistake, chose wrong, or fail - then get over it and find what IS going to work.

This is NOT in conflict with my prior statement of "sticking with it". I find that people either 1) don't try something long enough to see if it's going to work - they get distracted by the next new shiny thing; or 2) they stick with it forever despite the poor results.

I'm suggesting a rational balance between the two. And a good way to do that is to decide ahead of time what success and failure look like, then do everything to can to make whatever you decided to do a success.

If you want better results you are going to have to do things differently. Simply decide WHAT you're going to do and just do it.

Next time, I'll dive into the Theory of Constraints second Law of Leadership -- "Just do it!"

Wishing you unsissified success and a happy July 4th, (Please post your thoughts and comments to this post.)

Friday, July 2, 2010

This is Part 2 of a multi-part series that will be posted on the Velocity Scheduling System Coaching Program blog. We covered the biggest constraints and most common constraints we find as Theory of Constraints consultants.

Friday, May 21, 2010

http://www.TOCHandbook.com NEW Theory of Constraints Handbook best price and special offer for Chapter 22 on Mafia Offers. 43 Theory of Constraints Experts from around the world have contributed to this new TOC Handbook including, of course, Dr Eliyahu M Goldratt. This book is published by McGraw-Hill ISBN 9780071665544 and is edited by James Cox and John Schleier.

McGraw-Hill is offer the hard bound handbook and each chapter can also be purchased as a separate book.

Check out this video to get more information on how to get the best price for the hardbound handbook and how you can get over $500 in bonuses if you purchase Dr Lisa Langs ebook Chapter 22.

Wednesday, March 24, 2010

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn}

Dr. Lisa: So business owners cope with the issue in several ways. Many let the problem happen to them. They have long-standing vacation policies that dictate how much time off people get, most often dictated by length of service. Many times, the employees get to choose when they would like off, with no limit as to how many people can be off at a time. But, some business owners do manage this, placing a limit on how many people can be off at the same time, and from the same department.

Brad: In my experience, once employees make enough money, time off becomes a high priority. And, that is in conflict with the needs of the business and business owner. I want a secure, satisfied work force to keep turnover down, but the more secure and satisfied they are, the more time off they desire.

Dr. Lisa: Interesting dilemma to have with your best and longest term employees. And, I would guess that you also have employees who constantly need last minute time off to deal with the crisis of the moment. Brad: Yes, of course. Dr Lisa: Unplanned time off can be very disruptive. Sometimes, it is the same people who need or take unplanned time off over and over again. That requires enough people in total to cover for the lost productivity. It may be additional "protective capacity" in the department, or in other departments that pitch in to help. Sometimes, the work just sits and waits for the employee to return, especially when no one else has that skill set. That interrupts flow, and flow is the most important thing a business needs to maintain.Brad: Again, these problems hit small businesses especially hard. There is no one else with the needed skill set and/or there aren't enough people to get the job done in the first place.

Dr. Lisa: How did you handle it as an owner of a label printing business?Brad: By installing a system that wasn't popular, but was very effective. For all non-exempt employees, I raised pay rates and the vacation that was possible to earn. That was the good news, and provided me the opportunity to put in a system that had some teeth to it. Everyone earned vacation by working a full work week. Any unplanned absences during regular hours (being late, sick, etc.) resulting in earning less vacation, and required using existing vacation time for the time off. No longer was vacation an entitlement that was just given, and we actually had a system for "earning" it. We coordinated employees' vacation such that two weeks of vacation were taken by employees in blocks, one week in December and another in July. Otherwise, two weeks notice was required, and we quoted two weeks lead-time, so we could predict available resources accurately. Dr. Lisa: Would you recommend something like that for other business owners.Brad: Only if they have a problem with availability of people.Dr Lisa: Nice answer and as you know, I agree. We should only do those things that are necessary and sufficient to achieve the results we're after. So my recommendation is to do the Velocity Scheduling System Coaching Program first (or Project Velocity System for service companies). Then, if you have this issue, it will show up in the red zone of the buffer and you now know what to do about it.

Here's to maximizing YOUR profits!

Dr Lisa

(c)Copyright 2010, Dr Lisa, Inc. All rights reserved.

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Wednesday, March 17, 2010

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn}

Dr. Lisa: Each employee has a life outside his or her job in a business. They have family, financial and other pressures. Time off is sometimes needed.

Brad: Of course, but business owners have to run the business to satisfy their customers, as well as make enough profit to stay in business. Time off can be a real issue. In some businesses, it is the main issue.

Dr. Lisa: In many businesses, employees have holidays and earned vacation. Normally there are paid breaks for non-exempt employees. In addition, depending on the company, they might also have paid sick leave and/or unpaid time off.

Brad: Often times, the more senior the employee, the more earned vacation they have. And senior employees are frequently the most skilled. When they are off, it's tough to maintain productivity. Early in my career, I supervised a small department of highly skilled employees. We were responsible for the production of a large group of paper mills. It didn't take me long to realize that on average, one person would be off on vacation every day. And of course, it didn't work out that way. Half the department would be gone the whole month of December. Most small businesses have this problem, although they cope with it in different ways.

Dr. Lisa: Yes, I've seen all kinds of different ways business owners cope with this, including NOT dealing with it at all. But, to maintain due date performance, there needs to be some predictability and consistency of resource availability. In the Velocity Scheduling System (based on Theory of Constraints drum buffer rope), machine shops are comparing load to capacity for several weeks into the future. Often the company policy requires less notice for vacation than the scheduling horizon, meaning that significant variability is added from even planned time off, not to speak of unplanned time off that happens with no notice. Due date performance is jeopardized.Dr. Lisa: Then there is the impact on profitability. Paid time off is an operating expense. Throughput (Throughput equals Sales dollars minus Truly Variable Costs in Theory of Constraints Throughput Accounting) dollars must exceed Operating Expense to make a Profit. During some weeks and months of the year, there isn't enough productive time available to produce enough Throughput to make money. This puts the business owner in the position of having to make enough more money in the more productive months to make up for the loss months. Brad: And, customers don't care about the people scheduling issues the supplier has. They expect what they want when they want it (or at least when it was promised). For sure, the demands placed on a supplier by a customer do not neatly fit into the preferences of when employees would like to work.

... to be continued in Part 67
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Sunday, March 14, 2010

http://www.ProjectVelocitySystem.com Critical Chain Project Management based on Goldratt Theory of Constraints. This Theory of Constraints video on Goldratts Critical Chain Project Management CCPM explains how to get MORE projects DONE faster. This video covers 1) why it’s so difficult to get projects done on-time; 2) how to select the right projects (or prioritize jobs); and 3) how to get MORE projects DONE faster with Project Velocity System for project based companies including service companies.

Wednesday, March 3, 2010

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

So how do we get the key people in a highly custom job shop to do the totally counter intuitive steps of the Velocity Scheduling System (based on Theory of Constraints Simplified Drum Buffer Rope)? Well, instead of pushing the steps of a system they don’t understand, don’t agree with, and have no intuition around - we build on a previous success.

What success? Ask any custom job shop if they have ever pulled out all the stops for a customer and turned a job really quickly. Most (probably all) will say yes. Ask them to tell you the story. You will find that they were able to do a job in a fraction of their typical quoted lead-time. For example, one client did a job in 3 days that they would normally quote a 6 week lead-time for.

When they are telling the story ask about what they had to do to get that job done. And what did they had to stop doing or what jobs did they have to stop working on to make it happen. Listen very closely, take notes and ask questions to draw out the story.

Typically they will explain how they had to stop working on a several jobs that they had already started. Then they will talk about how they "crashed" the job. "Crashing a job" is our terminology for bringing multiple resources to bear on a job. They might have used 2 lathes to run operation 1. And as soon as one piece was done it immediately went to operation 2 on a mill instead of waiting for all it sister parts to complete operation 1. In this way, the job just zipped through the shop.

They were able to complete this job so quickly because they 1) reduced work in process by stopping work on other jobs; 2) By focusing on finishing this one job and 3) by "crashing the job" and bringing multiple resources to work on it.

These 3 actions are some of the key components of the Velocity Scheduling System (VSS). The problem you would discover is that they think that they cannot continue to take these actions on an on-going basis. And if they did, they would be inefficient and the company would lose money.

So what we now explain, is that the VSS is a system that will help them find the balance between what they did on that rush job and efficiency. Then we simply ask - would you be willing to try it and to help customize VSS for their plant. We will explain everything, but knowledge does not change behavior, what we need from you is a commitment to try what we ask.

Who would say no to that? Particularly in the group environment we have for our VSS Coaching Program.

If we can get the biggest detractor for each company to agree to try it, to really do the program, they are unlikely to go back on their word. (Law of Consistency) Then, the crystal clear step by step instructions of VSS, in combination with their story and experiences will help the new process (VSS) to stick.

This process of building on a success can be used in any number of circumstances. We’ve also used it to help companies with their sales and marketing, project completion, and distribution solutions. How can you use it? Drop us a line and let us know your thoughts.

Wednesday, February 24, 2010

In Theory of Constraints we follow a process to improve. First we decide "what to change". To do this, of course, we need to agree on the problem(s). Once we have consensus on the problem we then work on the solution or "what to change to". And after that, we decide "how to cause the change".

It all sounds very straight forward and logical and it is. This process does work, but at times it can prove to be challenging -- especially when we don’t take enough time to agree on the problem. So Brad and I are especially vigilant about that. Because there is really no point to moving into discussing the possible solutions unless and until we have agreement on the problem. Every time we’ve pushed ahead too fast we always have to go back and get agreement on the problem.

This is particularly true when we are talking about problems that the Theory of Constraints (TOC) logistical solutions will solve. So Brad coined the expression “we are going to go slow so that we can go fast”. That approach has helped us to get better, faster results with clients. Then we teach our clients to do this each time a challenge, problem, or opportunity presents itself. And, with a little coaching and guidance, they also get very good at this.

Then we move to agreeing on "what to change to". Now, you would think this should be pretty straightforward once we’ve agreed on the problem, but we have found it’s not that easy. Why?

There can be multiple solutions that would work or we think there are multiple solutions that could work.

People are only comfortable with solutions which they are familiar with and have intuition around.

We don’t know what we don’t know.

The Theory of Constraints solutions are often counterintuitive, the opposite of what most people do now, and most people have no familiarity or intuition around them.

That is the highest compliment someone can pay and we have clearly agreed on the problem. Then those same companies argue and resist every step of the way during implementation. This was super frustrating until we learned how to get them to agree on "what to change to".

So how do we get the key people in a highly custom job shop to do the totally counter intuitive steps of the Velocity Scheduling System? Well, instead of pushing the steps of a system they don’t understand, don’t agree with, and have no intuition around - we build on a previous success.

... next week I'll take you through how we do that.

What's your experience with getting buy in? Please tell me in the comments of this post.

Wednesday, February 17, 2010

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Brad: Aren’t customers the real problem? Supplying incomplete information to the engineers, late? Dr. Lisa: Blaming customers won’t solve the problem, although what you say is often true and they are a large source of variability.

Brad: So what is the real problem, and what is the solution? Dr. Lisa: The real problem is how engineers do what they do. (It’s typically NOT that we need more engineers.) But it isn’t just the engineers, it is all of us. It is how projects are managed. We allow some bad assumptions about the best way to manage projects significantly deteriorate our project performance. It is true everywhere around the world.

Brad: For example?Dr. Lisa: For example, the idea that there is good multi-tasking. Multi-tasking has a terrible effect on engineering. Engineers must finish projects, and that means they need to 1) know which projects to focus on and 2) work on finishing those, rather than starting all of them. Projects need to flow quickly through engineering. But that is just one example. I have a white paper on the subject called Information Overload Destroyer that can be downloaded at http://www.informationoverloaddestroyer.com/ for additional examples. Brad: So what is Project Velocity System, and how does it help?Dr. Lisa: In Project Velocity System Coaching Program, I will take the people involved with managing and doing projects through 10 sessions followed by 10 coaching sessions aimed at getting immediate improvement in project delivery: On time, in scope, and within budget. In other words, we will focus on getting a job ready for manufacturing BEFORE they need it. Brad: I thought that in project management, if you’re lucky, you only got to pick two of the three. Of course, with a lot of projects, you get one or none. It’s not unusual for projects to be late, with scope sacrificed, and way over budget.Dr. Lisa: That’s reality without a process, but with the right process, you can ensure that engineering is not and will not starve manufacturing. And this can be accomplished by the end of the Project Velocity System Coaching Program and most often without hiring a single additional engineer.
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Want to improve your engineering and project management performance? Go to http://www.projectvelocitysystem.com/ to learn more and sign-up for the next available program. Want to talk about it? Just give us a call or send an email.

What are the challenges YOU face getting jobs through engineering? Tell me your 2 biggest challenges in the the comment box!

Brad: It’s been three years since we joined NTMA as National Associate Members. Shortly after we joined, after seeing the benefits Theory of Constraints (TOC) could have for NTMA members, you developed the “Velocity Scheduling System.” It is for scheduling machine shops (and job shops) to help them improve lead times, due date performance, and to reduce the ensuing chaos that results from the 9 Challenges of Scheduling A Machine Shop* they contend with daily. You’ve had 35 small, medium, and very large shops attend—online—with a 100% success rate. Why create a program for engineering?
*You can download that free report here: www.VelocitySchedulingSystem.com/ebook

Dr. Lisa: Many machine shops also cope with problems in engineering. A job comes in, and it goes into the queue. It can be feast or famine. When it is feast, engineers are multi-tasking between hot and red hot jobs, and put the shop under real time pressure when they are late with their designs and prints. They need a good solution, too, so I developed the Project Velocity System, and there is a software package to support it.

Brad: Engineering is like graphic design in printing. When new orders start coming, it is easy to have them pile up, starving the shop. It can be a real bottleneck. And when it is slow, that’s an expensive resource to have idled. Very few other people know how to do their job, and engineers don’t seem to do other jobs well, either.

Dr. Lisa: Yes, that’s exactly what happens. Engineering or design starves manufacturing. And, many of the companies that participated in Velocity Scheduling System went on to create a Mafia Offer with our on-line Mafia Offer Boot Camp. This put even more pressure on engineering because with an outstanding market offer shops started bringing in more NEW business which means more load on engineering.

In addition, even without a Mafia Offer, you typically do not want engineering to be your constraint. Engineering needs the capacity to feed the shop, so the company can meet its sales goals, and maintain short, responsive lead-times with 100% due date performance all of the time.

... to be continued. Part 64 will continue with Getting Jobs Through Engineering

What are the challenges YOU face getting jobs through engineering? Tell me your 2 biggest challenges in the the comment box!

Wednesday, February 3, 2010

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Brad: Next, we have a choice. Most business owners have a desire to transfer the business to one or more "insiders", but the business may be worth more and the business owner would make more money sooner if the business was sold to a third party. So, it's helpful to choose one or the other for exit planning. Choosing one initially doesn't mean that you can't change your mind later:

4. Do you know how to sell your business to a third party and potentially pay the least possible taxes?

5. Do you have any plans on how you will transfer your business to family members, co-owners or employees while paying the least possible taxes and enjoying maximum financial security?

Dr. Lisa: And why do you say that transferring to insiders yields less money or takes longer for the business owner when compared to a third party sale?

Brad: Most businesses are not saleable. They are too small, not profitable enough, or have some other issue(s). No business broker or investment banker will waste their time representing a business that buyers won't buy. If a business is valuable enough to be sold to a third party, the process takes time to execute and there are plenty of pitfalls, but business owners that can sell to a third parties usually do. The threshold is somewhere between $5 and $10 million in business value, depending on market conditions and the quality of the company. These business owners cash out, and with proper planning, can still take care of the insiders they want to.

But it is valid to transfer to insiders. The problem is that most family members, co-owners, and employees don't have any money! What is required in this case is an elegant exit plan, because it will be the current and future cash flow of the business that is needed to fund the business owner's exit from the business, in conjunction with the ownership transfer. I find it interesting that rather that selling for maximum value as in a third party sale, transferring for the lowest defensible value is the best way for the business owner to maximize after-tax cash in a transferring to insiders.

Dr. Lisa: Transferring to insiders sounds complicated.

Brad: It doesn't need to be. In either case, a sale to a third party or a transfer to insiders, the business owner needs professional help. But we aren't done with the questions that need answering. The next two are related: 6. Do you have a continuity plan for you business if the unexpected happens to you?

7. Does your family have financial contingency plans if the unexpected happens to you?

Dr. Lisa: In TOC, we say the first rule of management is to "be paranoid". So this has to do with business continuity and personal wealth and estate planning. Are most business owners prepared?

Brad: Some are but most aren't. And even if a business owner did a buy-sell agreement, or estate planning, chances are that was years ago and the documents are out-of-date. Exit Planning requires a team of advisors, coordinated by an exit planning professional. Creating an exit planning roadmap, implementing it over time, and keeping it up-to-date is crucial for the business owner that wants to meet his or her retirement objectives.
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Want to have an Exit Plan? Go to http://www.scienceofbusiness.com/exitplan.aspx and take the first step.
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Here's to maximizing YOUR profits (and selling price of YOUR business)!

Tuesday, February 2, 2010

SERVICE COMPANIES! I'm looking for 5 service companies to test our Project Velocity System starting sometime TBD in March. You know the 5 circles demonstration I do in my Maximizing Profitability workshop? -- this is the version for service companies!

You will get $1000 off the $4995 price and a longer free trial of the software. The software is web based and allows you to coordinate geographically distant resources. If you do project based work, but not super complex (like building airplanes) then you may be a candidiate. Examples include: engineering firms, design firms, marketing companies, software, web design/SEO services, recruiting, internet marketing, and a whole bunch more. If you want to be considered, please reply to this email and tell me a little about your company and why I should choose YOU for this test! To get an idea of how the manufacturing one works, see http://www.velocityschedulingsystem.com/ and this one will be similiar but include software.

Monday, February 1, 2010

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Dr. Lisa: Let me start. We established in our last article that Exit Planning is consistent with Theory of Constraints, Lean and Six Sigma because business owners need processes that will increase profitability and business value. So now, let's help business owners check whether they are ready to exit, or what additional steps they would need to take to be ready.

Brad: First, a business owner needs to understand his or her objectives. Here's the question we need answered:

1. Do you know your exact retirement goals and what it should take in cash to reach them?

Dr. Lisa: Oh, I like it. That's the first step in Theory of Constraints (TOC) as well, understanding the objective. And then design a process to achieve the objective more and more. In a for-profit business, it's usually "make more money now and in the future". I know my answer for question number one.

Brad: Good. Now we need to know where we are in relation to the goal. So next we need to know:

2. Do you know how much your business is worth today, in cash?

Dr. Lisa: That's a much tougher question for me - business worth. How do you find out?

Brad: It depends. If the business owner is close to exiting, a valuation by a Certified Valuation Analyst is recommended. But if you are just starting the exit planning process, a range of value can be calculated by a qualified CPA, and should be updated annually. Industry "rules of thumb" aren't good enough, and may be misleading. Pay a few bucks and get it done. Next, we need to know:

3. Do you know the best ways to maximize the income stream generated by your ownership interest?

Dr. Lisa: I know the answer, it's TOC!!! There is no better way to leverage existing resources to maximize profitability now and in the future. Use the Velocity Scheduling System to do more with existing resources, and create an unrefusable offer-a Mafia Offer-to sell the capacity that's revealed.

Brad: Was that a commercial? Not that there's anything wrong with that...

Dr. Lisa: Yes, of course! Theory of Constraints is so powerful and I feel inclined to remind people of that fact. We helped 30 highly custom job shops improve last year -- substancially! A 100% success rate! What else could you have had these shops do with that amount of success?

And, we've had over 70 companies go through our Mafia Offer Boot Camp -- all creating great offers that they can use to sell more and increase the value of their business.

But I digressed. Let's get back to exit planning.

Brad: The answer to question three is where most business owners get stuck both in operating their business and with exit planning. If there is a gap between what you need (question #1) and where you are (questions #2), then you need to know how to close the gap (question #3).

Get on-line access to ALL Goldratt Theory of Constraints Videos for the entire month of February for only $499. To take full advantage of this offer ACT NOW! You will have access for the entire month of February 2010.

If you have ever wanted to learn Theory of Constraints or hear more from Goldratt, now is the time. You get access for the entire month of February to the whole video library brought to you with one of the best technologies available for internet streaming and OnDemand learning.

Monday, January 25, 2010

http://www.VelocitySchedulingSystem.com/webinarvideo Theory of Constraints scheduling for machine shops and job shops based on Goldratt book The Goal called drum buffer rope and simplified drum buffer rope. Why is scheduling custom job shops and machine shops so hard? Can it be easier? What are the most important things to consider when deciding HOW you will schedule job shop? How important is the software you choose?

If you're looking to improve your scheduling and you own or run a job shop or machine shop, you don't want to miss these insights!

Dr Lisa Lang (know as Dr Lisa) will be your webinar presenter. She is a Theory of Constraints expert and recently worked for Goldratt Consulting owned by Dr Eliyahu M Goldratt, author of The Goal and father of Theory of Constraints. Dr Lisa developed the Velocity Scheduling System Coaching Program to hand hold companies through the process of implementing the Theory of Constraints scheduling technique called Drum Buffer Rope.

Brad: Unless the business managed to maintain its sales and profit levels and growth rates, the business is probably less valuable. So, even business owners with exit plans have probably extended the date of their exit and/or reduced the amount they are willing to accept for the business.

Dr. Lisa: How about demographics of business owners?

Brad: With so many businesses owned by baby boomers, there are a lot of business owners our there that would like to exit in the next few years. I heard a statistic the other day that half of all business owners are emotionally—not financially—ready to sell, but are waiting for a white knight to appear, meaning they aren’t doing anything to properly prepare the business for sale.

Dr. Lisa: What are the choices a business owner has for selling or transferring his business?

Brad: The business owner would usually make the most money by selling to a third party. But many business owners have different objectives, and would prefer to transfer the business to a family member(s), or another owner(s), or to an employee(s). Exit planning helps in both cases.

In a sale to a third party, exit planning can minimize taxes and yield the greatest amount of after-tax proceeds from the sale. In a transfer, exit planning can help the owner keep control as long as necessary, minimize risk, and maximize the amount of after-tax money received.

Dr. Lisa: We work with owners of small businesses all the time. I see how exit planning fits. Business owners need to put in place robust processes—using TOC, Lean, and Six Sigma—that help their company grow and become more and more profitable. And they need to put in place a management team to run the business without being dependent on the owner. Both make the business more valuable.Brad: Correct. Without an exit plan, a business owner does not have an end in mind. However, even with an exit plan, growing more and more sales and profits is not a given. The TOC approach to marketing and sales fits perfectly. Most of these business owners do not now have an offer that is “unrefusable” to their customers and prospects (a “Mafia Offer”) and a robust sales process to deliver it. Improved marketing and sales is a requirement for every company, with or without an exit plan. But coupled with an exit plan, the business owner is more likely to meet his exit planning objectives.
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Want to have an Exit Plan? Go to http://www.scienceofbusiness.com/exitplan.aspx and take the first step.
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Here's to maximizing YOUR profits (and selling price of YOUR business)!

There is nothing as fundamentally important as having an Exit Plan. The purpose of exit planning is for owners to achieve their financial and lifestyle objectives after they leave their business. It covers when you plan to exit, how much you’ll want or need from a sale/transfer of ownership, and to whom you want to transfer (a third party, family, or employees/co-owners). Some people refer to it as succession planning, transition planning or just selling my business.

Dr. Lisa: What’s Exit Planning have to do with TOC, Lean, Six Sigma and continuous improvement?

Brad: It is consistent with TOC’s three questions. What to change, what to change to, and how to cause the change. When a business owner decides how much he or she needs from the sale of the business by when, we can calculate the growth is needed to accomplish the objective. A business that has put in place excellent processes—the kind TOC, Lean, and Six Sigma provide—coupled with a management team that can operate without being dependent on the owner, is much more valuable.

Dr. Lisa: How is exit planning done?

Brad: First, the business owner works with an exit planning advisor to develop the framework for his exit plan. This is usually developed by answering a series of questions aimed at determining when he wants to exit, how much is needed from the sale/transfer of the business in addition to other personal resources, and to whom the business owner wants to sell/transfer the business.

Next, the exit planning advisor coordinates the business owner’s other advisors—like the CPA, Estate Planning attorney, financial/insurance advisor, and business consultant—to flesh out the plan. From then on, apart from course corrections, the plan is being implemented over time until the ultimate exit.

Dr. Lisa: Are most businesses ready to sell?

Brad: No, most are not ready to sell. And a business that is not ready to sell will either be sold for less than the business owner needs, or it will be liquidated.

Dr. Lisa: In real estate, it is well known that before you buy a property, you have an exit strategy. Is this true for businesses, too? Do most business owners go into business with an exit plan?

Brad: No, most businesses are owned and run by entrepreneurs that have grown their business over time. Most of these owners are totally consumed by running their business, and have not thought enough about their eventual exit from the business. This is unfortunate because it can take several years to make the business valuable enough to meet their financial and lifestyle objectives after they leave the business.

Wednesday, January 6, 2010

TOC is a large body of knowledge. It’s very holistic. Underlying all of it, though, are a set of thinking processes. If you understand how to think, you can derive any number of the Theory of Constraints solutions.

TOC Thinking is a process to recognize, verbalize, and challenge assumptions (through the use of visual tools).

There are assumptions everywhere. Some are correct and some are incorrect. Want to communicate better? Be really clear about assumptions.

Have you ever given instructions on what you wanted done and then been surprised or frustrated about things turning out differently than what you expected? That's assumptions at work.

3 Definitions of Assumptions:

Accepted cause and effect relationships, or estimates of the existence of a fact from the known existence of other fact(s). [from businessdictionary.com]

The act of taking for granted, or supposing a thing without proof; supposition; unwarrantable claim. [from 1913 Webster]

Assumptions are beliefs or ideas that we hold to be true — often with little or no evidence required. [from HyperTextBooks]

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Brad: Who cares? Is this really that important? In the last 20+ years since Throughput Accounting was invented to replace cost accounting, not very many business owners have even heard of it, much less felt a need to change.

Dr. Lisa: True. Most just went out of business slowly. Like the frog in the pot when the heat slowly increased, and never jumped before it was cooked.

Brad: When I switched the label printing business I own from cost accounting to throughput accounting back in 1997, it was uncomfortable. The process took time and perseverance. And there wasn’t much help available for me back then. But I found the sweet spot where conventional cost accounting leads business owners to believe they’d be losing money on jobs, and where throughput accounting clearly indicated we were making a load of money.

Dr. Lisa: It is really unfair to competitors when you understand throughput accounting, and price accordingly. We call that “competing with blind kittens” because cost accounting is such an inferior technology.

Brad: Cost accounting was invented before the Model T. Why do business owners that are so up-to-date with other types of technology, and appreciate keeping up with the rate of improvement in technology, not think to look for improved technology in business methods?

Dr. Lisa: I don’t know the answer to that, but my guess is that they are more comfortable with new technology in their area of expertise and less comfortable with new technology where they are not an expert – financial management. And, even if they have some interest in this new Throughput Accounting technology it’s hard to give up the old until you fully understand the new. Hmmm…that sounds familiar.

Brad: Whoa, you’re right! It did take me a lot of time to make the change. I guess that does explain why it’s easier to stay with the old technology.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2009, Dr Lisa, Inc. All rights reserved.

Want to catch up with technology? Have Dr. Lisa present “Maximizing Profitability and Achieving a Viable Vision” to your company, and/or have us help you with a Pricing Project to apply Throughput Accounting to your business. Your increased profits are guaranteed, and well as competitor’s indigestion and insomnia.